IB Diploma Programme (DP) - SL & HL · Economics

Market failure—externalities and common pool or common access resources: Practice Questions

5 multiple-choice questions marked as you go, and 3 written questions with worked solutions. All on Market failure—externalities and common pool or common access resources.

8 questions19 marksFree, no account

Question 1

1 mark

Which of the following characteristics best define a common pool resource, such as a community forest?

Question 2

1 mark

From the perspective of allocative efficiency, the socially optimum level of output in any market is the quantity where:

Question 3

1 mark

Which of the following explains why a common pool resource, such as international fishing waters, faces the threat of over-exploitation (the "tragedy of the commons"), whereas a public good faces the threat of non-provision?

Question 4

1 mark

In a free market, a positive externality of consumption, such as the use of public transport, typically leads to which outcome?

Question 5

1 mark

In the context of common pool resources, such as a local fishing lake, why does the "tragedy of the commons" typically occur in a free market without government intervention or collective agreements?

Question 6

4 marks

Explain why common pool resources, such as ocean fisheries, often lead to market failure and identify one government policy that could potentially mitigate this issue.

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Question 7

5 marks

Explain why common pool resources lead to market failure by comparing the private incentives of users with the socially optimum condition involving marginal external costs (\(MEC\)).

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Question 8

5 marks

Using the concepts of marginal private benefit (\(MPB\)) and marginal social benefit (\(MSB\)), explain why the consumption of vaccines in a free market results in a positive externality of consumption and identify the resulting impact on social welfare.

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